Rev. Rul. 56-609

Advice has been requested whether remuneration for teaching at a university in the United States received by a professor, a resident of Canada, who is temporarily visiting the United States for the purpose of teaching at such university, is subject to the taxes imposed by the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954), in view of the provisions of Article VIII A of the Tax Convention between the United States and Canada, C.B. 1955-1, 624, at 626. The university has been held to be exempt from Federal income tax under the provisions of section 501(a) of the Code and has waived its exemption from the Federal Insurance Contributions Act taxes in accordance with section 3121(k) of the Code. The professor's employment began after the effective date of the waiver.

The taxes under the Federal Insurance Contributions Act are imposed with respect to `wages' for `employment,' as those terms are defined in section 3121 of the Act. Under such section, the term `employment,' with certain exceptions not here material, means any service, of whatever nature, performed within the United States by an employee for the person employing him, irrespective of the citizenship or residence of either.

Section 7852 of the Internal Revenue Code of 1954 provides in part as follows:

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(d) TREATY OBLIGATIONS.-No provision of this title Internal Revenue Code of 1954 shall apply in any case where its application would be contrary to any treaty obligation of the United States in effect on the date of enactment of this title.

Therefore, the taxes imposed by the Federal Insurance Contributions Act are applicable with respect to the remuneration received for the services in question, unless the imposition of such taxes would be contrary to a treaty obligation of the United States.

Article VIII A of the Tax Convention between the United States and Canada, supra , provides, in effect, that a resident of Canada who is temporarily visiting the United States for the purpose of teaching, for a period not exceeding two years, at a university, college, school or other educational institution in the United States shall be exempt from tax with respect to the remuneration received for any such services for such period. Such article, which is effective January 1, 1951, contains reciprocal provisions with respect to residents of the United States who perform similar services in Canada. The Protocol provides that the taxes referred to in the Tax Convention, insofar as the United States is concerned, are the Federal income and excess-profits taxes. C.B. 1955-1, 631. Therefore, the provisions of the Tax Convention do not affect the taxes imposed by the Federal Insurance Contributions Act.

Accordingly, it is held that remuneration received by the Canadian resident for teaching at the university while temporarily in the United States is subject to the taxes imposed by the Federal Insurance Contributions Act.